The Evolution of Property Management

[Franklin Spees]

For the past 17 years I've been practicing as a real estate attorney, broker, investor, urban planner, syndicator and owner of a mid sized property management company in California.  It has been my experience and observation that the relationship between the Landlord (LL) and the Property Manager (PM) is critical and cannot be overstated...but it is also extremely precarious.  

For investors in today's market, the competition for properties with healthy cash flow is intense. Interest and vacancy rates continue to remain low (for now) and the common perception seems to be that virtually anyone with some spare cash (or a self directed IRA) can fix, flip, reposition, rehab, swap, wholesale, lease to purchase, buy/hold, etc. But for those who decide to keep the property, they often go in search of a good property manager to implement their grand plan of maximizing rent in search of the coveted passive income. What they quickly discover is that virtually a single capital expenditure, a few inflated vendor invoices or a slow turn, could literally obliterate that month, quarter or year of being in the black.

Likewise, PM's have to be concerned with much more than "Tenants, Toilets and Trash". We work in one of the most regulated and litigious industries in the country, especially CA. It is a daily challenge to navigate the local, county, state and federal governments; local Code Enforcement, Housing Authorities, Department of Real Estate, Franchise Tax Board, Secretary of State, IRS, Dept. of Fair Housing & Employment, HUD...to name a few.

I have come to believe that in order for each party to meet their respective objectives both sides must meet in the "reasonable" middle. On the one side, LL's need to get comfortable paying for value and stop chewing down reasonable fees which are necessary to make the business model perform and prioritize the property.  Moreover, set realistic expectations within the scope of their responsibilities. Don't expect PM's to repeatedly chase down third and four bids (burning out their vendor relationships) and then expect that they will be construction managers as well. On the other hand, PM's need to get better at communicating, implementing available tech tools and managing expectations.

What other elements am I missing in designing this symbiotic relationship?